The Takao-class ships were approved under the 1927 to 1931 supplementary fiscal year budget, and Atago, like her sister ships, was named after a mountain. In this case, she was named after Mount Atago, located outside Kyoto.

The Takao-class cruisers were an improved version of the previous Myōkō-classcruiser design, incorporating technical elements learned with the development of the experimental light cruiser Yūbari. They had a distinctive profile with a large, raked main smokestack, and a smaller, straight, second smokestack. Intended to address issues with the Myōkō class, the Takao class had thicker armor, dual-purpose main guns which could be used against aircraft, and torpedo launchers moved to the upper deck for greater safety. However, as with its predecessors, the Takao class was also top-heavy.[2]

Propulsion was by 12 Kampon boilers driving four sets of single-impulse geared turbine engines, with four shafts turning three-bladed propellers. The ship was armored with a 127 mm (5.0 in) side belt, and 35 mm (1.4 in) armored deck, and the bridge was armored with 10 to 16 mm (0.39 to 0.63 in) armored plates.[2]

Atago was laid down at Kure Naval Arsenal on 28 April 1927, launched on 16 June 1930, and commissioned into the Imperial Japanese Navy on 30 March 1932.[3] Although Takao was the lead ship in the class, Atago was actually completed two months earlier.

During this time, issues with their stability and seaworthiness due to the top-heavy design became evident. Takao and Atago were rebuilt, resulting in an improved design: the size of the bridge was reduced, the main mast was relocated aft, and hull bulges were added to improve stability. After rebuilding was completed, Takao and Atago patrolled off the coast of China in 1940 and early 1941.[2] She was commanded by Captain Tomiji Koyanagi from October 1940 to July 1941.

From January–March 1942, Atago was based out of Palau, and was involved in operations to seize the oil-rich Netherlands East Indies, participating in numerous combat operations, including the Battle of the Java Sea.[5] On 2 March, south of Bali, Atago and Takao sank the old destroyerUSS Pillsbury. On 4 March, Atago, Takao and Maya, together with the destroyers Arashi and Nowaki attacked a convoy which had departed Tjilatjap for Fremantle, Australia, and sank the Royal Australian NavysloopHMAS Yarra after a 90-minute battle, along with the British tanker Francol, depot ship Anking, and British minesweeper 51. In the same battle, Atago captured the 1030 ton Dutch freighter Duymaer van Twist and 7089 ton freighter Tjisaroea, both of which were later placed into Japanese service. After taking Vice Admiral Kondō on an inspection tour of Japan’s new possessions in the former Netherlands East Indies, Atago returned to Yokosuka Naval District on 17 April 1942, where she was assigned to the unsuccessful pursuit of Admiral William F. Halsey's Task Group 16.2 (TG 16.2) after the Doolittle Raid on Tokyo .[4]

In the Second Naval Battle of Guadalcanal (15 November), during a night gun duel with the American battleshipsUSS South Dakota and Washington, Atago and Takao hit South Dakota with seventeen 20 cm (8 in) rounds, five 15 cm (6 in) and one 12.7 cm (5.0 in). The battleship Kirishima also hit South Dakota with a single 14 in (360 mm) round that exploded on her aft No. 3 turret's barbette. South Dakota was damaged, but not sunk. Early in the battle, Atago and Takao each launched eight Type 93 "Long Lance" torpedoes at Washington but they all missed. Atago was damaged slightly as a result of the action, and returned to Kure for repairs on 17 December.[4]

Atago remained based out of Truk through July 1943, when she returned to Yokosuka Naval Arsenal for her third modernization and refit, which added two triple-mount Type 96 25 mm (0.98 in) anti-aircraft guns.[4]

On 23 August 1943, Atago returned to Truk with Army reinforcements for Rabaul, and continued making sorties supporting Japanese forces in the Solomon Islands through November.
In response to American carrier aircraft raiding in the Gilbert Islands, Atago sortied with Vice Admiral Jisaburō Ozawa's fleet to engage the American carriers. The fleet consisted of the aircraft carriers Shōkaku, Zuikaku and Zuihō, the battleships Yamato and Nagato, heavy cruisers Myōkō, Haguro, Tone, Chikuma, Mogami, Atago, Takao, Chōkai and Maya, the light cruiser Agano and fifteen destroyers. Despite extensive searches, this force failed to make contact with the American striking force and returned to Truk.[4]

In response to the Allied landings on Bougainville on 1 November 1943, Atago and several other Japanese cruisers were sent to Rabaul to prepare to attack the Allied landing forces. On 5 November, while refueling at Rabaul, the task force was attacked by 97 planes from the carriers USS Saratoga and Princeton. Atago sustained three near-misses by 500 lb (230 kg) bombs that killed 22 crewmen, including her skipper Captain Nakaoka who was hit by a bomb splinter while on the bridge. On 15 November, Atago returned to Yokosuka for repairs, during which time a Type 22 surface-search radar set, along with additional Type 96 25 mm anti-aircraft guns were installed.[4]

In January 1944, Atago returned to Truk. On 10 February, the cruiser force was attacked by the American submarineUSS Permit in a night surface attack, but she missed with four torpedoes. Atago was then reassigned to Sentai-4 based in Palau under Vice Admiral Jisaburō Ozawa's First Mobile Fleet at Palau from 1 March, and was stationed at Davao in the southern Philippines from 1 April. The cruiser force was unsuccessfully attacked by the submarine USS Dace on 6 April.[4]

On 13 June, during the Battle of the Philippine Sea, Atago was part of Vice Admiral Takeo Kurita’s Mobile Force Vanguard, deployed from Tawi Tawi in an attempt to force the American 5th Fleet into a "decisive battle" off of Saipan. In what came to be called the "Great Mariana's Turkey Shoot", Japanese aircraft attacking US Task Force 58 off of Saipan suffered overwhelming losses. Atago was undamaged from this battle and arrived at Hashirajima on 24 June for a final refit, at which time a Type 13 air-search radar set was installed, along with further four triple- and 22 single-mount Type 96 AA guns (which brought her total to 60) .[4]